One of Australia's most respected economists, Saul Eslake, presents to the 122nd Annual Henry George Commemorative dinner. Government intervention has compounded rather than eased affordability pressures according to the systemic data delivered here.

1. 1
Saul Eslake
Melbourne
2nd September 2013
Australian housing policy: Fifty years of failure
Address to the 122nd Annual Henry George
commemorative dinner
Note: the opinions expressed in this talk are solely the author’s, and should not be attributed or imputed to any other organization with
which he is connected or associated.

2. 2
Up until the past decade, the housing stock grew at a
faster rate than the population
Sources: Australian Bureau of Statistics, Census results; author’s calculations.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1947-
1954
1954-
1961
1961-
1966
1966-
1971
1971-
1976
1976-
1981
1981-
1986
1986-
1991
1991-
1996
1996-
2001
2001-
2006
2006-
2011
Occupied private dwellings
Population
% pa
Inter-censal periods
Inter-censal growth in population and the housing stock

3. 3
Home ownership rates rose substantially between 1947
and 1961
Note: percentages are of occupied private dwellings excluding those for which tenure is not stated.
Sources: Advisory Council for Intergovernment Relations, Australian Housing Policy and Intergovernmental Relations, Discussion
Paper No. 14 (1982), Appendix B, Table B4.
50
55
60
65
70
75
1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
%
Census
Home ownership rates at Censuses

4. 4
The average number of people per dwelling increased
between 2006 and 2011 – for the first time in 100 years
Sources: Advisory Council for Intergovernment Relations, Australian Housing Policy and Intergovernmental Relations, Discussion
Paper No. 14 (1982), Appendix B, Table B3; Australian Bureau of Statistics, 2011 Census Quickstats and earlier Census reports.
2.50
2.75
3.00
3.25
3.50
3.75
4.00
4.25
4.50
4.75
1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
Number
Census
Average number of people per occupied private dwelling at Censuses

5. 5
Home ownership rates haven’t increased at all since 1961
Note: percentages are of occupied private dwellings excluding those for which tenure is not stated.
Sources: Advisory Council for Intergovernment Relations, Australian Housing Policy and Intergovernmental Relations, Discussion
Paper No. 14 (1982), Appendix B, Table B4; Tony Kryger, Home Ownership in Australia – Data and Trends, Parliamentary Library
Research Paper No, 21 (February 2009), Table 1; Australian Bureau of Statistics, 2011 Census Quickstats.
50
55
60
65
70
75
1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
%
Census
Home ownership rates at Censuses

6. 6
Despite substantially lower interest rates since 1991 home
ownership rates have fallen in almost every age bracket
Sources: Judith Yates, Hal Kendig & Ben Phillips, Sustaining Fair Shares: the Australian Housing System and Intergenerational
Sustainability, AHURI Final Report No. 2011 (February 2008); updated for 2011 Census Results by Judith Yates, communication to
author.
25
61
75
79
70
25
78
81
67
7979
73
64
47
0
10
20
30
40
50
60
70
80
90
15-24 25-34 35-44 45-54 55-64 65+ All
Age of household head
1961 1971 1981 1991 2001 2011
%
Home ownership rates by age of household head, 1961-2011

7. 7
be married or engaged
be under the age of 36
have saved up to $1500 ‘in an approved
form’ (generally, with a financial
institution whose major business was
lending for housing) in three years
be buying a new, or newly-built home …
… valued at less than $14,000
and have not previously owned a home
The First Home Owner Grant was really just the first of the
2000s explosion in ‘status-based welfare’
To get a grant under the 1960s Home Savings
Grant Scheme you had to :
have a family income of less than 155% of
average weekly earnings
and have not previously have owned a
home
To get a grant under the 1980s First Home
Owners Scheme you had to :
have saved up to $2500 ‘in an acceptable
form’
have a family income of less than 155% of
average weekly earnings
and have not previously have owned a
home
To get a grant under the 1970s Home Deposit
Assistance Scheme you had to :
have not previously have owned a home
To get a grant under the 2000s First Home
Owners Grants Scheme you have to :

8. 8
Governments have spent at least $22½bn on cash grants to
first home buyers over the past fifty years
Note: expenditures shown are calculated as nominal values deflated by All Groups CPI.
Sources: Advisory Council for Intergovernment Relations, Australian Housing Policy and Intergovernmental Relations, Discussion
Paper No. 14 (1982), Appendix G, Tables G5 & G6; Australian Government, Budget Paper No. 1, Budget Statements, 1983-84 through
1994-95; Commonwealth Grants Commission, 2008 Update Report (Attachment D) and Report on GST Revenue Sharing Relativities,
2010 Review Volume 2; CoAG Reform Council, National Affordable Housing Agreement: Performance Reports 2009-10 and 2010—11.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
$bn in 2010-11 prices
Financial years ended 30 June
Expenditure on assistance to first home buyers

9. 9
‘Negative gearing’ became much more attractive after
the 1999 decision to halve the rate of capital gains tax
Sources: Australian Taxation Office, Taxation Statistics 2010-11 (latest available); author’s calculations.
Taxpayers with rental income
Taxpaying property investors
0
5
10
15
20
25
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
$bn
Financial years ended 30 June
Interest paid by property investors
-10
-5
0
5
10
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
$bn
Financial years ended 30 June
Net rental income
45
50
55
60
65
70
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
% of total
Financial years ended 30 June
na
Loss-making landlords as pc of total
8
10
12
14
16
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
% of total taxpaying individuals
Financial years ended 30 June

10. 10
0
5
10
15
20
85 86 87 88 89
% ch from year earlier
Sydney
Melbourne
Brisbane
Adelaide
The assertion that the abolition of negative gearing in the
mid-80s caused a “landlords’ strike” is an urban myth
Note: Shaded area denotes the period (from July 1985 until September 1987) in which negative gearing was not available
for property investments. Sources: ABS; Real Estate Institute of Australia.
Rents
0
5
10
15
20
85 86 87 88 89
% ch from year earlier
Hobart
Darwin
Perth
Canberra
Vacancy rates
0
1
2
3
4
5
85 86 87 88 89
% (moving annual median)
Melbourne
Brisbane
Sydney
Adelaide
0
1
2
3
4
5
6
85 86 87 88 89
% (moving annual median) Hobart
Perth
Canberra

11. 11
Negative gearing hasn’t done anything to improve the
supply of rental housing compared with other countries
Sources: Real Estate Institute of Australia; US National Association of Realtors.
Rental vacancy rates
0
2
4
6
8
10
12
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
%
US
Australia

12. 12
Housing policies that would work
Abolish grants to and stamp duty exemptions for first home owners and
‘negative gearing’ for investors (in all assets)
Redirect funds thereby saved (or revenue no longer foregone) to programs that
increase housing supply, directly or indirectly
Expand or replicate programs which actually work and are ultimately self-
funding, like Western Australia’s ‘Keystart’ shared equity scheme
Replace State and Territory Government stamp duties on land transfers with a
more broadly-based land tax (with no-exemption for owner-occupiers)
Take a more ‘holistic’ view of urban infrastructure investment, recognizing
that investments in transport infrastructure can expand the supply of housing –
and fund such infrastructure in part by ‘betterment levies’ on increases in land
values
Reduce the extent to which infrastructure and services in new housing estates
are funded by ‘upfront’ charges (and if necessary allow local authorities to
incur more debt, and service it through rates)
Reduce the cost, complexity and regulatory uncertainty associated with
‘brownfields’ and infill developments in established areas

13. 13
Important Notes
This document has been prepared by Saul Eslake (the author), to accompany his talk to the 122nd Annual Henry
George Commemorative Dinner, organized by Prosper Australia and Earthsharing Australia (‘the organizers’) on 2nd .
No part of the document is to be reproduced, made available online, circulated or otherwise distributed without
permission of the author, or of the organizers of the event.
This document does not purport to constitute investment or business strategy advice. It should not be used or
interpreted as an invitation or offer to engage in any kind of financial or other transaction, nor relied upon in order
to undertake, or in the course of undertaking, any such transaction. No representations of any kind are made, nor
are to be inferred, about any securities or financial instruments whatsoever based on anything in or inferred from
this document.
The information herein has been obtained from, and any opinions herein are based upon, sources believed reliable.
The views expressed in this document are those of the author. Neither the author, nor any entity by which he is
employed, nor any body of which he is a member or with which he is in any other way associated or affiliated, nor
any of their affiliates or subsidiary or related entities however makes any representation as to their accuracy or
completeness and the information should not be relied upon as such.
All views, opinions and estimates herein reflect the author's judgement on the date of this document and are
subject to change without notice. The author, each and every entity by which he is employed, and each and every
body or entity of which he is a member or with which he is otherwise associated, their affiliated and subsidiary
entities expressly disclaims any responsibility, and none of them shall be liable for any loss, damage, claim,
liability, proceedings, cost or expense (Liability) arising directly or indirectly (and whether in tort (including
negligence), contract, equity or otherwise) out of or in connection with the views, opinions and contents of and/or
any omissions from this document except to the extent that a Liability is made non-excludable by legislation.